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Choice Dividend

A choice dividend, also known as a scrip dividend, allows shareholders to choose whether to receive their dividend payment in cash or additional shares of the company’s stock. This option gives investors flexibility, enabling them to take cash for immediate income or reinvest in the company by receiving more shares, which can help grow their investment. Companies may offer choice dividends as a way to conserve cash while rewarding shareholders.

Example

A company declares a $1 per share dividend and gives shareholders the option to receive either cash or the equivalent amount in additional shares, allowing them to choose based on their investment strategy.

Key points

• A choice dividend allows shareholders to choose between receiving dividends in cash or additional shares.

• It provides flexibility for shareholders to reinvest or take immediate income.

• Companies offer this to reward shareholders while conserving cash.

Quick Answers to Curious Questions

Companies offer choice dividends to give shareholders flexibility in how they receive their returns while potentially conserving cash by issuing additional shares instead of paying out cash.

Choosing stock allows shareholders to reinvest their dividends, potentially growing their investment and benefiting from future stock price appreciation.

Yes, shareholders typically have the option to choose cash or stock each time a choice dividend is offered, based on their current preferences or financial needs.